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Press Release
Congressional Oversight Panel Releases Report on TARP Use for Auto Industry
Lack of Transparency and Clear Objectives Leaves Congress, Public Unable to Evaluate Effectiveness of Treasury’s Strategy

September 9, 2009

WASHINGTON, D.C. — The Congressional Oversight Panel today released its September oversight report, “The Use of TARP Funds in Support and Reorganization of the Domestic Automotive Industry.” The Panel noted that although taxpayers may recover some portion of the investment in Chrysler and General Motors, it is unlikely they will recover the entire amount. Absent clearly articulated objectives, the Panel is unable to determine whether this result represents a failure of Treasury’s strategy.

Even before last year’s financial crisis, the American automotive industry was facing severe strains. In 2008, U.S. automotive sales fell to a 26-year low. By the end of the year, a long-term slump became an acute crisis, with Chrysler and General Motors (GM) unable to secure credit and facing reduced consumer demand. Without new financing, they faced collapse – a potentially crippling blow to the American economy that could eliminate nearly 1.1 million jobs. Facing this prospect, the Troubled Asset Relief Program (TARP) was used to provide American automotive companies with short-term financing and additional loans to finance the bankruptcy reorganizations of Chrysler and GM.

American taxpayers now own 10 percent and 61 percent of the new Chrysler and GM companies. In protecting the interests of taxpayers, the Panel found Treasury defended its interests as would any other stakeholder; however they did so without a clear indication of the ultimate objectives. On one hand, Treasury negotiated aggressively in these transactions and conducted due diligence as if it were a private investor. On the other hand, the decisions to enter into these transactions in the first place and the due diligence that accompanied the decisions suffer from a lack of transparency.

Treasury’s support for the automotive industry differed significantly from its assistance to the banking industry. The bulk of the funds were available only after the companies had filed for bankruptcy, wiping out their old shareholders, cutting their labor costs, reducing their debt obligations and replacing some top management. The government’s role raises serious oversight issues, particularly Treasury’s conflict between competing objectives.

The Panel recommends that, to mitigate the potential conflicts of interest inherent in owning Chrysler and GM shares, Treasury should take exceptional care to explain its decision making and provide a full, transparent picture of its actions. To limit the impact of conflicts of interest and to facilitate an effective exit strategy, Treasury should also consider placing its GM and Chrysler shares in an independent trust that would be insulated from political pressure and government interference.

Given the questions surrounding Treasury’s use of its authority under TARP to aid the ailing domestic automotive industry, Treasury should provide its legal analysis justifying this decision. The Panel found that further questions about the propriety of the bankruptcy proceedings – accusations of illegal behavior and allegations that statutory bankruptcy priorities were overturned – are overblown and inaccurate. The full report can be found at

The Congressional Oversight Panel was created to oversee the expenditure of the Troubled Asset Relief Program (TARP) funds authorized by Congress in the Emergency Economic Stabilization Act of 2008 (EESA) and to provide recommendations on regulatory reform.  The Panel members are: former Securities and Exchange Commissioner Paul S. Atkins, Congressman Jeb Hensarling (R-TX), Richard H. Neiman, Superintendent of Banks for the State of New York, Damon Silvers, Associate General Counsel of the AFL-CIO and Elizabeth Warren, Leo Gottlieb Professor of Law at Harvard Law School.

Contact: Peter Jackson | | (202) 224-1670 |

Department of Financial Services


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